Title I of the 1935 Social Security Act created a program, called Old Age Assistance (OAA), which would give cash payments to poor elderly people, regardless of their work record. OAA provided for a federal match of state old-age assistance expenditures. Among other things, OAA is important in the history of long term care because it later spawned the Medicaid program, which has become the primary funding source for long term care today.
Although many people today only know about the Old Age Insurance (OAI) portion of the Social Security Act, in 1935, when the Act was passed, it was OAA that everyone was really interested in. Support for Old Age Insurance was much weaker, and President Franklin Roosevelt had to work hard to convince Congress that OAI was an important component of the Social Security Act. One problem with the Old Age Insurance plan was that reserves had to be built up before they could begin paying benefits, and no OAI benefits were supposed to be paid before 1942.
In the meantime, there were many elderly people who needed immediate help, and many others who would never receive much benefit from the OAI program because they were already retired or only had a few years left to work. Among others, Edwin Witte and Arthur Altmeyer, key contributors to the Social Security legislation, were concerned about those who were age 45-50, a group they called "the half old." OAA was designed to provide a stop-gap to make sure that those people had some help from the government as they aged, since they would not be able to contribute enough before they retired to collect a meaningful benefit.
OAA was fabricated out of the 28 state old-age assistance programs that had been put in place by the early 1930's. These programs varied quite a bit, but they were mostly brought into the new federal system as-is. Each state was allowed to set its own standards for determining eligibility and payments, with the federal government providing cash for a 50% match of up to $30 a month in aid. The lack of federal control was deliberate. The legislation was written that way to to get the support of states that wanted the federal government's assistance without too many strings attached. Only a few federal requirements were added:
- The old-age assistance program had to be available throughout the state, not just in certain counties.
- The State had to provide at least some of the financing for the program. (In some states the existing old-age assistance programs were only funded at the local level).
- Residency requirements could not be any longer than 5 out of the last 9 years, and the minimum age for receiving benefits could not be any older than age 65.
- The state had to create a single state agency to administer the plan and a system of administration and reporting to the federal government..
- The program had to include an appeals process for people who believed they had unfairly been denied old-age assistance.
- If the state or local governments collected money from the estate of any recipient of old-age assistance, half of that money had to be given to the federal government.
- Payments to anyone living in a "public institution" were prohibited.
All the other provisions of the existing plans continued into the OAA program. This meant that in many states OAA was not available to elderly people who had families who "ought" to be supporting them, and that beneficiaries could be required to turn over everything that they owned before receiving any assistance, while other states had no such restrictions.